PCTY · Paylocity Holding
Conviction · Medium · more likely to lead the S&P 500 over the next three months, by a modest margin
Wrong if: a daily close below $158.00
Note written ·
Price against the kill line
12.8% clear of its kill line on the 13 November 2026 close.
How to read this
The red mark is the price level of the published kill line: a close through it (a weekly close, on a weekly line) would prove the research note wrong on price. The dot is where the stock closed on 13 November 2026; a dot left of the mark has closed through its line.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close below $158.00, on record since 10 November 2026. The shares are up 22.5% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close below $158.00, which would return the shares to the level before the October analyst target increases and erase the post-report gain. Second-quarter recurring and other revenue under $423.0 million, or a cut to the $1.792 billion fiscal 2027 floor, would also show the case failing.
Research onlyNot in the portfolio.
Catalyst
Key figures from the filings · Technology
Quarter to 30 September 2026, filed 6 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 452
- Revenue, change on a year (%)
- +10.7
- Gross margin (%)
- 67.3
- Operating margin (%)
- 18.2
- Free cash flow, four quarters ($M)
- 491
- Net cash, cash less debt ($M)
- 63.3
- Price to earnings (×)
- 33.1
- Enterprise value to sales (×)
- 5.1
All filed numbers
What Paylocity Holding reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 452 | +10.7 | 67.3 | 18.2 |
| first filed | 445 | +11.0 | 67.5 | 19.0 |
| first filed | 502 | +10.5 | 72.3 | 31.3 |
| first filed | 416 | +10.4 | 67.8 | 16.9 |
| first filed | 408 | +12.5 | 68.5 | 18.2 |
| first filed | 401 | +12.2 | 67.8 | 16.5 |
| Pre-tax income ($M) | 82.6 |
| Net income ($M) four quarters: 279 | 57.6 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | −3.8 |
| Operating cash flow ($M) | 527 |
| Capital spending ($M) | 35.5 |
| Free cash flow ($M) | 491 |
| Cash and short-term investments ($M) | 195 |
| Debt ($M) long-term debt | 131 |
| Net cash, cash less debt ($M) | 63.3 |
| Deferred revenue ($M) +23.1% on a year | 36.8 |
| Backlog, orders not yet delivered ($M) +78.8% on a year | 274 |
| Receivables ($M) | 56.9 |
| Inventory ($M) | Not reported |
| Shareholders' equity ($M) | 1,150 |
| Market value ($M) | 9,261 |
| Enterprise value, market value plus net debt ($M) | 9,198 |
| Enterprise value to sales (×) | 5.1 |
| Enterprise value to operating income (×) | 23.3 |
| Price to earnings (×) | 33.1 |
| Price to book value (×) | 8.1 |
| Free-cash-flow yield (%) | 5.3 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 5.8% of shares outstanding sold short, 5.2 days of average trading to cover, +0.2% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $31.7M |
| 12 monthsfrom | $0 | $47.4M |
The thesis
Paylocity's first-quarter beat and raised fiscal 2027 outlook, reported 5 November 2026, make the shares modestly more likely than not to beat the S&P 500 over the next three months. The second-quarter report, expected around February 2027, settles whether recurring revenue growth holds near the roughly 9% now guided for the full year.
The company's 5 November 2026 release put recurring and other revenue at $424.5 million, up 12.0% from a year earlier, against guidance of $414.0 million to $419.0 million. Total revenue was $451.7 million, up 10.7%. Non-GAAP (adjusted) earnings per share were $2.09. The 10-Q filed 6 November 2026 shows quarterly revenue of $451.67 million against $408.17 million in the same quarter a year earlier.
The market has responded. The shares closed at $169.57 on 5 November 2026, before the report, and at $178.92 on 12 November 2026. That is 5.5% higher, and the close on 9 November 2026 of $177.81 cleared the 26 October 2026 pre-report close of $176.46. The intraday 52-week high is $181.56, set on 9 November 2026.
Citigroup raised its target to $214 on 9 November 2026, per company news. The shares are up 20.7% over three months.
Bullish and bearish views on Paylocity Holding Corporation
The bull case on Paylocity Holding Corporation (PCTY), in brief: results beat the company's own guide. The bear case: core growth is slowing.
Bull case
- Results beat the company's own guide. Recurring and other revenue of $424.5 million topped the $419.0 million high end of guidance. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $159.5 million, per the 5 November 2026 release.
- Full-year guidance moved up. Fiscal 2027 recurring and other revenue is now $1.792 billion to $1.807 billion, about 9% growth, from $1.777 billion to $1.792 billion on 4 August 2026. Adjusted EBITDA is $711.5 million to $721.5 million.
- The raise reaches earnings before client-fund interest. Adjusted EBITDA excluding interest on client funds is guided to $593.5 million to $603.5 million for the year. The first-quarter figure was $132.3 million against $117.1 million a year earlier.
- Analysts keep lifting targets. Citigroup raised its target to $214 on 9 November 2026. BTIG went to $210, and Citizens and Truist to $200 each, on 6 November 2026, with Truist moving up from $165.
- Cash generation continues. Trailing twelve-month free cash flow was $416.7 million, or 23.0% of revenue, and the company repurchased $152.5 million of stock (1.1 million shares) in the quarter, per the release.
Bear case
- Core growth is slowing. Recurring and other revenue grew 12.0% in the first quarter. The company guides about 10% growth for the second quarter ($423.0 million to $428.0 million) and about 9% for fiscal 2027.
- Interest income lifts total results. Interest income on client funds was $27.2 million in the first quarter, per the release. Lower short-term rates would reduce it, and the company guides it separately from recurring revenue.
- The price is above a cautious target. Barclays, rated Equal-Weight, raised its target to $176 on 6 November 2026, below the $178.92 close on 12 November 2026. The shares sit about 1.5% below the intraday 52-week high.
- Leverage rose. Long-term debt, all credit facility borrowings, was $131.3 million on 30 September 2026, from $81.3 million at the 30 June 2026 year end. Cash was $194.5 million.
- A major holder sells on a schedule. Director and 10% owner Steven Sarowitz sold 7,300 shares at an average $180.45 on 9 November to 10 November 2026, per a Form 4 filed 12 November 2026, under a Rule 10b5-1 plan. His Form 4 filings show sales on most reported trading windows since 20 October 2026.
Price setup
The last close was $178.92 on 12 November 2026. The highest close in the last six sessions was $180.04 on 11 November 2026, and the 52-week intraday high is $181.56 on 9 November 2026. The 52-week closing low is $95.10 on 10 April 2026.
The shares are 12.1% above their 50-day average of $157.85 and 40.0% above their 200-day average of $127.80, both as of the 12 November 2026 close. Most of the three-month gain came from October, before the report, and the shares have held it since.
A close above $181.56 would be a new 52-week high. The 26 October 2026 close of $176.46, the pre-report high, is the nearest level below the price from the earlier rally. The 13 October 2026 close of $158.11 is the last level from before the October target increases.
Catalysts ahead
- ~4 December 2026 (est.): November US employment report from the Bureau of Labor Statistics. Paylocity bills per employee per month, so payroll levels at mid-sized employers feed recurring revenue with a lag.
- 9 December 2026: Federal Reserve rate decision. Lower short-term rates reduce interest earned on client funds, which the company guides separately from recurring revenue.
- ~February 2027 (est.): Second-quarter fiscal 2027 results. Tests the $423.0 million to $428.0 million recurring and other revenue guide and the raised $1.792 billion full-year floor.
What would change the view
A daily close below $158.00, which would return the shares to the level before the October analyst target increases and erase the post-report gain. Second-quarter recurring and other revenue under $423.0 million, or a cut to the $1.792 billion fiscal 2027 floor, would also show the case failing.
The risks this note tracks, each with what would confirm it:
- Recurring revenue growth slows faster than the roughly 9% fiscal 2027 guide. Confirmed by: second-quarter recurring and other revenue below $423.0 million, or the $1.792 billion full-year floor lowered.
- Falling short-term rates cut interest income on client funds faster than guided. Confirmed by: total adjusted EBITDA guidance trimmed from $711.5 million to $721.5 million while the figure excluding client fund interest holds at $593.5 million to $603.5 million.
- The price already reflects the beat, leaving little room against cautious targets. Confirmed by: barclays' $176 target staying below the share price while other brokerages stop raising targets or cut them.
- Debt-funded buybacks and insider sales weigh on sentiment. Confirmed by: long-term debt above $131.3 million at the next report, or further large Form 4 sales by Steven Sarowitz.
What it trades with
Paylocity trades with mid-cap software and payroll vendors such as Paycom and Paychex, and with US small and mid-sized business employment. The company bills per employee per month, so payroll levels feed recurring revenue with a lag.
Interest rates matter twice. They move the valuation multiple on software shares, and they set the interest income on client funds. The AI product launches in September and October 2026 (Ignite hub and agents, Recruiting Optimizer) have no reported revenue contribution.
The evidence, claim by claim (8)
- First-quarter fiscal 2027 recurring and other revenue $424.5 million, up 12.0% from a year earlier, against guidance of $414.0 million to $419.0 million; total revenue $451.7 million, up 10.7%; non-GAAP EPS $2.09. Paylocity first-quarter fiscal 2027 results press release · as of
- Adjusted EBITDA $159.5 million, or $132.3 million excluding interest income on client funds; interest income on client funds was $27.2 million. Paylocity first-quarter fiscal 2027 results press release · as of
- Fiscal 2027 guidance: recurring and other revenue $1.792 billion to $1.807 billion (about 9% growth), total revenue $1.910 billion to $1.925 billion, adjusted EBITDA $711.5 million to $721.5 million. Paylocity first-quarter fiscal 2027 results press release · as of
- Second-quarter fiscal 2027 guidance: recurring and other revenue $423.0 million to $428.0 million (about 10% growth), total revenue $452.5 million to $457.5 million, adjusted EBITDA $152.5 million to $156.5 million. Paylocity first-quarter fiscal 2027 results press release · as of
- Quarterly revenue for the period ended 30 September 2026 was $451.67 million against $408.17 million in the same quarter a year earlier. Paylocity Form 10-Q filed 6 November 2026 · as of
- Trailing twelve-month free cash flow $416.7 million (23.0% of revenue); long-term debt $131.3 million; cash $194.5 million; repurchases of $152.5 million (1.1 million shares) in the quarter. Paylocity first-quarter fiscal 2027 results press release · as of
- Citigroup raised its price target to $214 (Buy); BTIG raised to $210, Citizens to $200 and Truist to $200 from $165, and Barclays (Equal-Weight) to $176 on 6 November 2026. Company news, analyst actions · as of
- Steven Sarowitz, director and 10% owner, sold 7,300 shares at an average $180.45 on 9 November to 10 November 2026 under a Rule 10b5-1 plan. SEC Form 4 filed 12 November 2026 · as of
Sources
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